Global Imbalances and Financial Crisis: Financial Globalization as a Common Cause

Yan Liang

Journal of Economic Issues, 2012, vol. 46, issue 2, 353-362

Abstract: Global imbalances and global financial instability are tightly connected and can be traced to a common cause, that is, financial globalization within the current monetary and financial system. The paper argues that financial globalization contributes to global imbalances by impeding real exchange adjustments, inducing export-led growth, and sustaining widening deficits in the financial core country. Meanwhile, financial globalization leads to increasing global financial instability. Without a true international clearing union, the United States is charged with providing global liquidity and managing financial risks; but the failure of the United States to provide these essential banking services ultimately brought about the 2008 global financial crisis.

Date: 2012
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DOI: 10.2753/JEI0021-3624460210

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